SMM Morning Comment For SHFE Base Metals (Dec 17)

SHANGHAI, Dec 17 (SMM) –

Copper

Fewer Arrivals During Long-Term Contract Negotiations, Year-End Rush to Meet Deadlines Drives Weekly Destocking of Copper Cathode [SMM Copper Morning Comment Dec 17]

Overnight, LME copper opened at $9,053/mt, initially dipped to a low of $9,032/mt, and then climbed steadily to an intraday high of $9,109.5/mt. It subsequently fluctuated downward, consolidated at the end of the session, and finally closed at $9,065/mt, up 0.09%. Trading volume reached 14,000 lots, and open interest stood at 270,000 lots. Overnight, the most-traded SHFE copper 2501 contract opened lower at 74,440 yuan/mt, rose to a high of 74,860 yuan/mt in early trading, then fluctuated downward, consolidated at the end of the session, and finally closed at 74,640 yuan/mt, up 0.23%. Trading volume reached 18,000 lots, and open interest stood at 137,000 lots. Macro side, the US December S&P Global Manufacturing PMI preliminary reading came in at 48.3, lower than expected and hitting a three-month low. Although the services sector still exceeded expectations in growth, the US dollar index fell back from highs overnight, providing some support to copper prices. Additionally, the PBoC stated that it would implement appropriately accommodative monetary policies, including timely RRR cuts and interest rate cuts, which also benefited copper prices. Fundamentally, as the year-end approaches, there remains some consumption support, coupled with fewer arrivals during long-term contract negotiations, leading to a destocking trend for copper cathode. As of Monday, December 16, SMM copper inventories in major regions nationwide decreased by 19,200 mt compared to last Thursday, reaching 103,100 mt. However, total inventories were 39,800 mt higher than the 63,300 mt recorded in the same period last year. In summary, as the year-end approaches, consumption may gradually weaken, and copper prices are expected to lack sustained upward momentum today.

Aluminum

Aluminum Ingot Inventory Slightly Declined During the Week; Weakening Demand and Eased Backlogs Increased Inventory Buildup Risks [SMM Aluminum Morning Meeting Summary Dec 17]

Overnight, the most-traded SHFE aluminum 2502 contract opened at 20,170 yuan/mt, reached a high of 20,205 yuan/mt, a low of 20,115 yuan/mt, and closed at 20,140 yuan/mt, down 75 yuan/mt or 0.37% from the previous day. On Monday, LME aluminum opened at $2,614/mt, hit a high of $2,615.5/mt, a low of $2,559.5/mt, and closed at $2,564.5/mt, down $50.5/mt or 1.93%.

Summary: On the macro front, according to CME's FedWatch tool, the market estimated a nearly 97% probability that the US Fed would cut interest rates by a quarter percentage point at the conclusion of its policy meeting on Wednesday. The yield on the benchmark US 10-year Treasury note fell by 0.8 basis points to 4.391%. Key data to be released this week include US GDP and inflation figures, which may further influence market sentiment. Domestically, positive signals continued to emerge. On December 16, the central bank announced plans for timely RRR cuts and interest rate cuts to support the stabilization of the real estate market. The Central Financial Office also responded with specific measures to boost consumption.

On the fundamentals side, high aluminum production costs have triggered production cuts in some capacities. On the demand side, domestic downstream aluminum demand has entered a deeper off-season. Additionally, the rush to export has led to early demand exhaustion, which may result in a significant decline in aluminum semis exports in December. Weakening domestic and overseas demand has dragged down the operating rate of downstream processing enterprises. According to SMM statistics, as of Monday, aluminum ingot inventory in major domestic consumption areas decreased by 6,000 mt WoW to 551,000 mt. The easing of shipment pace in Xinjiang caused fluctuations in aluminum ingot inventory, but the backlog in Xinjiang is expected to continue to ease. Caution is advised against the risk of concentrated arrivals. The turning point for aluminum ingot inventory is anticipated in late December, with low inventory providing weaker support for aluminum prices. In the short term, aluminum prices are expected to fluctuate amid mixed factors. Attention should be paid to changes in the macro environment and trends in aluminum production costs.

Lead

Low Inventories of Lead Ingots & Tight Raw Material Supply Provide Support for Lead Prices [SMM Lead Morning Comment Dec 17]

Overnight, LME lead opened at $2,012/mt and fluctuated rangebound during the Asian session. Entering the European session, LME lead rebounded to a high of $2,023.5/mt due to a weaker US dollar index. However, with increased short positions, LME lead plunged during late trading and closed at a low of $1,995/mt, down 0.92%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,470 yuan/mt, briefly touched a high of 17,550 yuan/mt in early trading, but was dragged down by LME lead decline. Longs reduced positions, and SHFE lead fell to 17,390 yuan/mt before closing at 17,395 yuan/mt, up 0.2%.

Macro side, the US December S&P Global Manufacturing PMI preliminary reading came in at 48.3, lower than expected and hitting a 3-month low. The December S&P Global Services PMI preliminary reading exceeded expectations at 58.5, marking a 38-month high. The December S&P Global Composite PMI preliminary reading also surpassed expectations at 56.6, reaching a 33-month high. The PBOC stated it would implement an appropriately accommodative monetary policy, with timely RRR cuts and interest rate cuts. It will continue to support the resolution of debt risks for financing platforms and stabilize the real estate market.

Fundamentals, both primary and secondary lead weekly operating rates showed signs of decline. Currently, weekly finished product inventories at secondary lead smelting enterprises have hit historical lows, and in-plant inventories of primary lead major delivery brands remain tight. Meanwhile, weekly operating rates of downstream lead-acid battery producers slightly increased. Additionally, battery scrap supply remains tight, and its price continues to support lead prices.

Zinc

US Manufacturing Data Declines, Dragging LME Zinc to Fluctuate Downward [SMM Zinc Morning Comment Dec 17]

Overnight, US manufacturing activity further declined, while the services sector continued to support the economy. Israel stated that an agreement on the hostage issue in Gaza has "never been closer"; ten EU countries sought to expand sanctions on Russian metals; Trump announced plans to meet with Putin and Zelensky to negotiate a ceasefire agreement; the central bank emphasized implementing a moderately loose monetary policy with timely RRR cuts and interest rate cuts; the NBS stated that in the next phase, efforts should focus on stabilizing employment, boosting income, and enhancing residents' consumption capacity; the Ministry of Finance decided to conduct government bond market-making support operations in December.

Overnight, LME zinc opened at $3,086/mt, briefly touched a high of $3,100.5/mt in early trading before its center slightly dipped and fluctuated around the daily moving average. During the night session, longs reduced positions and exited, causing LME zinc to fluctuate downward, with its center shifting to around $3,050/mt. It hit a low of $3,044.5/mt during the session and eventually closed down at $3,046/mt, a decrease of $43.5/mt or 1.41%. Trading volume decreased to 7,332 lots, and open interest fell by 631 lots to 233,000 lots. Overnight, LME zinc recorded a bearish candlestick, with its daily candlestick center moving downward, while the 5-day moving average below provided support. LME inventory decreased by 2,000 mt to 266,500 mt overnight, a drop of 0.74%, marking a reduction in LME inventory. Overnight, the preliminary December S&P Global US Manufacturing PMI recorded 48.3, lower-than-expected and hitting a three-month low, causing LME zinc to fluctuate downward.

Overnight, the most-traded SHFE zinc 2502 contract opened at 25,520 yuan/mt. In early trading, SHFE zinc fluctuated around the daily moving average before reaching a high of 25,580 yuan/mt. However, shorts launched high-level attacks, causing SHFE zinc to decline throughout the session. By the end of trading, its center shifted downward to 25,400 yuan/mt, and it closed at an intraday low of 25,380 yuan/mt, down 175 yuan/mt or 0.68%. Trading volume decreased to 32,633 lots, while open interest increased by 3,283 lots to 124,000 lots. Overnight, SHFE zinc recorded a bearish candlestick with no lower shadow, facing resistance from the 5-day moving average above and support from the 20-day moving average below. Overnight, dragged by the overseas market, SHFE zinc's center shifted downward. However, on the fundamentals side, SMM zinc inventory continued to decrease by 2,000 mt to 89,400 mt, with inventory reductions limiting the downside space for zinc prices.

Tin

SHFE Tin Opened Higher and Remained Stable in the Night Session; Spot Market Trading Rebounded [SMM Morning Tin Brief Dec 17]

In yesterday's night session, SHFE tin prices opened slightly higher and remained stable, with the overall trend showing slight fluctuations. Nevertheless, downstream enterprises showed increased purchasing enthusiasm WoW, with most companies starting to inquire about prices and make just-in-time procurement, while a few downstream enterprises began preparing for restocking. Smelting enterprises maintained a sentiment to stand firm on quotes at current price levels, with daily quotes leaning higher. Overall, the spot market trading atmosphere improved, and trading volume increased WoW. Most trading enterprises reported daily trading volumes of around one truckload, while a few trading enterprises recorded daily trading volumes of 2-3 truckloads. If SHFE tin prices remain at current levels, the spot market is likely to sustain a relatively active purchasing atmosphere in the future.